Equipment costing $400,000 with accumulated depreciation of $260,000 is sold at a gain of $10,000.This implies that $130,000 cash was received from the sale.

Question

Quizplus · Accepted Answer

We can use the following formula to calculate the cash received from the sale of an asset:

Cash received = Selling price - Book value

The book value of the equipment can be calculated as follows:

Book value = Cost - Accumulated depreciation
Book value = $400,000 - $260,000
Book value = $140,000

Since the equipment was sold at a gain of $10,000, the selling price must have been:

Selling price = Book value + Gain
Selling price = $140,000 + $10,000
Selling price = $150,000

Therefore, the cash received from the sale should be:

Cash received = Selling price - Book value
Cash received = $150,000 - $140,000
Cash received = $10,000

So the correct answer is B.

Equipment Costing $400,000 with Accumulated Depreciation of $260,000 Is Sold